European Experts Shake Their Heads at Indonesian Fuel Subsidy

Long lines at an Indonesian gas station following a government plan to raise gas prices in 2012. The plan was eventually scrapped after mass riots broke out.Most Indonesians rely on their motor vehicles to get around since there are no other mass rapid transit system available as alternatives. The sales of motor vehicles have been growing every year while the number of vehicles the roads can handle has stayed the same, resulting in traffic jams in major cities.

The government also heavily subsidizes fuel for motor vehicles, without which inflation and then mass riots would run rampant in the country.

There are a bunch of gas stations at every corner in Indonesia dominated by Pertamina, the state-owned oil and gas corporation, and some owned by Shell Indonesia, the Indonesian subsidiary of the world renowned Royal Dutch Shell.

The competition between gas stations is increasingly fierce in Indonesia. A lot of them offer loyalty incentives to woo customers. One example is to offer free bottled drinks per 150,000 rupiah (USD 1 = IDR 9,600.00) purchase of gasoline.